- 1 2024 Expat Choices
- 2 First, Worldwide Income, FBAR & FATCA
- 3 A Permanent or Temporary Move Abroad
- 4 Purchase a Golden Visa
- 5 Becoming a Digital Nomad
- 6 Expatriation From the United States
- 7 Apply for Act 60
- 8 Are You Already an Expat Out of Foreign Asset Reporting Compliance?
- 9 Current Year vs Prior Year Non-Compliance
- 10 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 11 Need Help Finding an Experienced Offshore Tax Attorney?
- 12 Golding & Golding: About Our International Tax Law Firm
2024 Expat Choices
For U.S. taxpayers who are considering becoming an expat and living overseas full-time, there are many different opportunities to choose from. While the overall result of choosing one of these four options has the same result — living overseas — there are various tax implications that will impact which choice is best, depending on their specific facts and circumstances — along with their overall endgame goals. Let’s take a look at four of the most common types of expat opportunities there are, including:
Purchase a Golden Visa
Become a Digital Nomad
Apply for Act 60
First, Worldwide Income, FBAR & FATCA
Before beginning your expat adventure, it is important to understand how the United States tax system works. Unlike almost every other country across the globe, the United States follows a worldwide income/citizenship-based taxation model. That means, that simply moving overseas and even earning all your income from overseas does not eliminate your U.S. tax and international information reporting filing requirements. Taxpayers are also required to report their foreign accounts, assets, and investments as well. Noting that there are mechanisms that expats can use to try to reduce or eliminate their U.S. tax liability, including the foreign earned income exclusion and foreign tax credits — as well as potential treaty elections or exceptions/exclusions to the substantial presence test if applicable.
A Permanent or Temporary Move Abroad
In deciding which option may work best for you when it comes to becoming an expat, it is important to note that some of these solutions are temporary and some of them are permanent. For example, becoming a digital nomad is just a temporary move, whereas formally expatriating from the United States is a permanent relinquishment or renouncement of U.S. person status.
Purchase a Golden Visa
For taxpayers who want to formally expatriate but are not considered dual citizens, they will have to obtain citizenship in another country before they expatriate, or else the United States will not accept the application. One of the quickest ways for some taxpayers to obtain second citizenship — especially if the lineage option is not available to them — is to purchase a citizenship-by-investment or residency-by-investment from one of the several countries that offer these types of ‘Golden Visa Programs.’ It is important to note, that even if a taxpayer obtains a golden visa and moves overseas, they are still considered U.S. persons for tax purposes so while they may be able to enjoy travel and living overseas, they are still subject to U.S. tax on their worldwide income.
Becoming a Digital Nomad
A quicker and simpler opportunity for some taxpayers who know they want to be an expat, but maybe only temporarily, is to obtain a digital nomad visa in the specific country in which they want to live. These types of visas are typically short in duration and much less expensive than a golden visa. Taxpayers who obtain a digital nomad visa are still US persons for tax purposes but if a taxpayer is just seeking to test the waters of living in another country then being a digital nomad might be the first step. Many countries now offer the digital nomad visa.
Expatriation From the United States
For taxpayers who know they no longer want to be considered a US person and would prefer to live overseas full time — or at least not sufficiently in the United States to meet the substantial presence test, post-expatriation — they may seek to formally expatriate from the United States and either renounce their U.S. citizenship or relinquish their long term lawful permanent resident status. Expatriation is a much more formalized and complicated process. Also, it is permanent because once a person gives up their citizenship or LTR status they have to start all over again if they decide they want to reobtain their US person status.
Apply for Act 60
Act 60 (previously axed 20/22) is Puerto Rico’s version of a golden visa type of investment. It can get a bit complicated, but from a baseline perspective, Puerto Rico is a territory and not a state. And, there are very specific U.S. tax rules that determine if a person is considered a Bona Fide Resident (BFR) of Puerto Rico — so that for BFRs, even if they are a US person, their Puerto Rico-sourced income is excluded from U, S., taxes. Thus, Puerto Rico developed Act 60 to allow qualifying taxpayers to avoid certain taxes under Puerto Rico law as well. Therefore, Act 60 may allow taxpayers who are U.S. citizens or U.S. persons to move to Puerto Rico and have income that would otherwise be taxable by the United States now being exempt under Puerto Rico law. As you may imagine, the IRS is not a fan of this program and has indicated that they have launched several civil and criminal investigations against taxpayers who may ‘misuse’ Act 60.
Are You Already an Expat Out of Foreign Asset Reporting Compliance?
For Taxpayers who may be considered Expats and did not timely file their FBAR and other international information-related reporting forms and do not qualify for an exception or exclusion to FBAR filing, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.
Current Year vs Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.